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New Trend: The Importance of Tracking and Measuring Innovation
To enable your company to expand and grow, there needs to be new ideas and innovation to create new offers, generate new revenues or reach new customers. Companies have demonstrated great return on innovation by measuring how new ideas turn into value-producing results. As easy as this sounds, it’s hard to keep track of new ideas and the long process it takes to turn them into successful business outcomes. It can become very messy and complicated to know how effective each idea can be for the company. So how do you measure innovation? What do you need to do to determine which idea is the right choice for a company?
Elmhurst University defines innovation as “a process that eludes quantification and requires the reason for it to be measured.” Monitoring an idea turning into a success can help understand its effectiveness. The timeline of monitoring innovation can last from a month, a year or longer. When measuring ideation and the implementation of new ideas, it can establish a new baseline for company innovation performance. Management can keep track of ideation and experiments with the key success factors.
Measurements offer a quantitative way to identify opportunities to increase innovation and is a clear form of communication. It provides an equitable distribution of the recognitions and rewards. It helps establish an organization’s values through innovation. It understands the value being generated for the company. According to Marc Chason, he stated that “Innovation is a process that is best managed with a long term perspective, not necessarily measured in long time increments, but rather in completion of targeted goals.”
There is no right or wrong way on how to measure innovation. The most important element to tracking it is through commitment and hard work.
New Insight: The Best Metrics for Measuring Innovation Success
It would be simple if there was only one way to measure innovative success; however, there are many for you to choose from. They vary widely depending on the industry and timeline of each measurement system. According to Erik Roth at McKinsey,, “... innovation-measurement activity or measurement focus has been largely on what I’ll describe as ‘upstream’ activity. That is the inputs into what makes innovation happen. We see a lot of quantification of the number of ideas and the size of the portfolio.”
While you don’t need to limit yourself to one metric, a typical metric should cover the basics of what needs to be recorded. The list below gives information to consider what should be determined and calculated when turning a new idea into an innovation.
1. Collect and Track Each Idea
When someone suggests and submits ideas, they should be recorded digitally, such as email, to help track the number of proposals. It should then be examined by an idea evaluation committee with a chairperson to categorize each idea. They must respond to the suggester(s) with a status report. Each response should be quick and give periodic status updates. The committee should meet on a regular basis to consult ideas and rate by size and potential for success. It helps maintain a sense of urgency to move ideas through the necessary stages of testing, economic evaluation, and implementation. Innovators become discouraged when an organization delays the idea along with the “innovation supply chain.” The status of submissions is crucial for submitters.
2. Estimate the Costs and Benefits of Each Idea
This stage helps identify any major cost barriers to the idea and determine if it’s fiscally viable. For a small project less than $100,000, it should have a simple payback period analysis that shows a return of investment for three years or less. Any risks involved would be low considering the amount of money being put in. Larger ideas would include a discounted cash flow analysis along with initial costs, recurring costs, and forecasted income stream. The only risk for big ideas would be to contemplate the financial evaluation of each idea.
3. Measure the Implementation of Each Idea
Once an idea has been approved and shows value, it’s ready to be implemented to become a fully fledged project. The planning stage includes detailed estimates of its time, cost, and scale. It also highlights the technical feasibility and financial viability. Implementation requires some hard work and dedication to fulfill the exact goals for it. After a project is complete, an analysis of any problems that were encountered should be noted. The variance between the estimated and actual costs along with the benefits provided by the project should be calculated.
4. Calculate the Added Value of Each Idea
When an idea is approved for implementation, its potential value should be estimated based on the cost-benefit analysis during the second stage. Some ideas may not have apparent benefits financially, such as safety or customer service ideas. The estimated value of the idea may be referred to until implementation. After calculating the value of an implemented idea, the difference between the estimated value of an idea and its actual implemented value will be given useful information to the organization.
5. Determine the Innovation Rate Across the Organization
This stage is a vital part of the management of innovation as it provides a measurement of each employee’s innovation rate. It predicts its rate for departments, divisions, and an entire organization may be readily calculated. As implementation grows, more ideas should be monitored until they become complete innovations. The rate of ideas provides another key metric that will help manage the execution of every single idea.
6. Push Out an Internal Marketing Strategy
Marketing contributes so much into turning ideas into reality. By spreading the word about a new innovation, it peaks the interest of a target demographic who would want to learn more. It’s best to work out the details of this marketing strategy before sharing about the idea with others in and out of the company. It also helps raise awareness for how a company is changing with new innovations.
7. Continue Tracking and Monitoring Progress of Innovation Metrics
It’s always safe to make sure that an innovation is still working well after its completion. There shouldn’t be too much regulation or check-up as it can be overbearing for some trackers. Perhaps, there should be a monthly or annual check up to see if the innovation is still working well. If not, it might be for the best to work out new ideas to help replace it. It also helps to use any feedback from customers to fix any issues or complaints associated with it.
8. Issue Rewards and Recognition According to Results
By the end of the project, the innovators should be given rewards according to the results given. It will be challenging to consider all aspects of a strategic innovation. It isn’t always about financial outcomes, but about what it contributes to a company. Despite the uncertainty, the people who came up with the ideas should know how much their contribution mattered to the company. Whether it's a promotion or a pay increase, it helps to let employees know that they matter to the company as a whole.
When utilizing the metrics, it requires careful planning and development to ensure strong results. A majority of these processes include establishing goals, creating plans for the future, generating revenue for new ideas, and delivering the percentages of sales for new innovations. It takes plenty of customer feedback and learning some lessons to reach the actual goal.
New Action:
Tracking and measuring innovation must also open more ideas and opportunities for future innovation. It takes in plenty of effort for both an individual and a team. They need to work on turning an idea into a great tool for a company to thrive. The most valuable component in innovation is working as a larger team with a shared goal. Here are some other lessons to help you understand what it takes for you to measure innovation.
1. Measuring the metrics of success helps to know the number of ideas and how often they turn into actual projects.
2. Creating goals and delivering on them with using the metrics as guidelines help provide the exact results needed for the idea to become a success.
3. Executing each idea in a timely manner and rewarding the innovators will help them feel valued as members of the company.
Are you ready to take your business to the next level with a new innovation strategy? We can help you evaluate the market and determine the best next steps. If you are interested N³ Innovation can help you! Contact us today!
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